I confess to being a little perplexed by all of this IRS stuff. I dislike discrimination against conservatives and abuses of the federal tax power well more than the next guy; all the same, it’s taken me a while to understand why the allegations against the IRS are so upsetting to such a broad range of folks. Is it really news that powerful federal authorities might use that power for political reasons, or for narrowly partisan advantage?
I take it that there is a specific norm against using the IRS for political or partisan purposes, in part as a reaction to abuses a few decades ago, but again, what’s the source or purpose of that norm? (And why is the norm so powerful that the President rushed to insist that it would be wrong for the IRS to act politically?)
Here’s my theory: The IRS has successfully convinced both legislators and judges that it should be basically immune to the rule of law. Many of the tax laws, like the standard for 501(c)(4) organizations, are incredibly “murky”, making it hard for most taxpayers even to know whether they are in compliance. And the IRS’s own views about these vague standards get broad deference.
What’s more, under the economic substance doctrines, even full compliance with the tax laws (which the IRS often calls “technical”) is not a defense if the IRS deems the transactions to be inconsistent with the spirit of the law. Courts usually defer to the IRS’s views about these transactions too. Tax practice is like practicing in a court of equity where the IRS is the chancellor.
But responsibility is needed to preserve this power. Perhaps the IRS’s basic immunity from judicial supervision only lasts so long as they can convince everybody that this is a narrowly technical area of law where the government agents are unusually neutral and public-minded.